[Federal Register Volume 71, Number 142 (Tuesday, July 25, 2006)]
[Proposed Rules]
[Pages 42067-42074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11754]


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DEPARTMENT OF COMMERCE

National Telecommunications and Information Administration

47 CFR Chapter III

[Docket Number: 060512129-6129-01]
RIN 0660-AA16


Implementation and Administration of a Coupon Program for 
Digital-to-Analog Converter Boxes

AGENCY: National Telecommunications and Information Administration, 
Commerce.

ACTION: Notice of proposed rulemaking and request for comment.

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SUMMARY: The National Telecommunications and Information Administration 
(NTIA) proposes to implement and administer a program to provide $40 
coupons to consumers for use towards the purchase of digital-to-analog 
converter boxes. Congress mandated the coupon program in Title III of 
the Deficit Reduction Act of 2005. The converter boxes are necessary 
for consumers who wish to continue receiving broadcast programming over 
the air using analog-only televisions after February 18, 2009--the date 
that full-power televisions stations are required to cease analog 
broadcasting. Without converter boxes, consumers with analog-only 
television sets will be unable to view full-power television broadcasts 
unless they purchase digital television sets or subscribe to cable or 
satellite service.

DATES: Comments must be submitted by 5 p.m. EDT, no later than 
September 25, 2006.

ADDRESSES: Comments via mail should be submitted to: Milton Brown, 
Office of the Chief Counsel, National Telecommunications and 
Information Administration, 1401 Constitution Avenue, Room 4713, 
Washington, DC 20230. Comments may also be sent by facsimile to (202) 
501-8013. Electronic comments may be submitted to [email protected] 
or to Regulations.gov at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Milton Brown at (202) 482-1816.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Overview

    In this Notice of Proposed Rulemaking (NPRM), NTIA seeks comment on 
ways to implement the digital-to-analog converter box coupon program 
pursuant to the Digital Television Transition and Public Safety Act of 
2005 (the Act).\1\
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    \1\ See Title III of the Deficit Reduction Act of 2005, Pub. L. 
109-171, 120 Stat. 4, 21 (Feb. 8, 2006).
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    The Act, among other things, requires the Federal Communications 
Commission (FCC) to require full-power television stations to cease 
analog broadcasting by February 18, 2009. Recognizing that consumers 
may wish to continue receiving broadcast programming over the air using 
analog-only televisions not connected to cable or satellite service, 
the Act authorizes NTIA to create a digital-to-analog converter box 
assistance program. Specifically, Section 3005 of the Act authorizes 
the Assistant Secretary for Communications and Information to 
``implement and administer a program through which households in the 
United States may obtain coupons that can be applied toward the 
purchase of digital-to-analog converter boxes.'' NTIA is proposing 
these regulations to implement the requirements of the Act.

B. Summary of Relevant Provisions of the Act

    Section 3002 of the Act amends the Communications Act of 1934 to 
direct the FCC to terminate analog television licenses for full power 
stations and to require all full-power Class A television stations in 
the digital television service to broadcast in the radio spectrum 
between 54 and 698 MHz, by February

[[Page 42068]]

18, 2009. Section 3003 of the Act directs the FCC to begin an auction 
of returned analog television spectrum no later than January 28, 2008 
and to deposit auction proceeds into a fund established by the Act no 
later than June 30, 2008. The returned analog television spectrum to be 
auctioned is the band between 698 and 806 MHz, except for the 24 
megahertz that has been reserved for public safety uses and certain 
other frequencies that have already been made available through 
auction. Section 3004 of the Act establishes a new Treasury fund to be 
known as the Digital Television Transition and Public Safety Fund 
(Fund). It directs the receipts from the FCC's analog spectrum return 
auction to be deposited into the Fund.
    Specific to this NPRM, section 3005 of the Act directs NTIA to 
implement and administer a program through which eligible U.S. 
households may obtain a maximum of two coupons of $40 each to be 
applied towards the purchase of a digital-to-analog converter box. The 
Act defines the term ``converter box'' to mean a stand-alone device 
used solely for digital-to-analog conversion.\2\ The Act does not 
define ``eligible household.'' To implement the coupon program, the Act 
authorizes NTIA to use up to $990 million from the Fund for the 
program, including $100 million for program administration. NTIA is 
also authorized to expend up to $1.5 billion for the program, including 
$160 million for administration, upon a 60-day notice and certification 
to the Committee on Energy and Commerce of the House of Representatives 
and the Committee on Commerce, Science, and Transportation of the 
Senate that the $990 million is insufficient to fulfill coupon requests 
for eligible U.S. households.\3\ This section also authorizes NTIA, 
beginning on October 1, 2006, to borrow not more than $1.5 billion from 
the Treasury to implement the program. NTIA, however, must reimburse 
the Treasury for this amount, without interest, as recovered analog 
television spectrum auction proceeds are deposited into the Fund.
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    \2\ Section 3005(d) provides that the term ``digital-to-analog 
converter box'' means ``a stand-alone device that does not contain 
features or functions except those necessary to enable a consumer to 
convert any channel broadcast in the digital television service into 
a format that the consumer can display on television receivers 
designed to receive and display signals only in the analog 
television service, but may also include a remote control device.'' 
120 Stat. at 24.
    \3\ See supra note 1 at Section 3005(c)(3).
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II. Proposed Rules and Request for Comment

    NTIA recognizes that there will be a number of solutions, including 
market based solutions, to address potential disruption of television 
service resulting from the analog to digital transition. Many consumers 
will neither need nor want a coupon to purchase a converter box. For 
example, many households that are now receiving over-the-air analog 
television signals will have purchased digital receivers by the time 
that analog broadcasting ends. We also assume that many households that 
currently receive over-the-air television transmissions will begin 
receiving digital service through one of the multichannel video 
programming distributors, such as cable or satellite service. 
Therefore, we consider this coupon program to represent one of a number 
of solutions to accommodate consumers once analog broadcasting ends.

A. Eligible U.S. Households

    NTIA proposes that a ``television household'' is a ``household'' 
with at least one television. A ``household'' consists of all persons 
who currently occupy a house, apartment, mobile home, group of rooms, 
or single room that is occupied as separate living quarters and has a 
separate U.S. postal address.\4\ An eligible household address shall 
not be a post office box.
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    \4\ This definition is based on the definitions of ``household'' 
and ``housing unit'' used by the U.S. Census Bureau. See U.S. Census 
Bureau, http//www.census.gov (Current Population Survey--Definitions 
and Explanations); see also ``Digital Broadcast Television 
Transition: Several Challenges Could Arise in Administering a 
Subsidy Program for DTV Equipment,'' GAO-05-623T (May 26, 2005) (GAO 
Challenges Report) at 10 (discussion on eligibility criteria for 
low-income households).
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    The Act and its legislative history indicate that the coupon 
program is not intended to cover every television in every household in 
the United States. The legislative history provides that the coupon 
program is intended to help consumers who wish to continue receiving 
broadcast programming over-the-air using analog only televisions not 
connected to cable or satellite.\5\ The legislative history also notes 
that as of June 2004, only 14.86 percent of U.S. television households 
relied exclusively on over-the-air transmission.\6\ Furthermore, the 
Act limits the number of coupons per U.S. household to only two.\7\ As 
a result, NTIA proposes to define those U.S. television households that 
will be eligible to participate in the coupon program as those 
households that only receive over-the-air television signals using 
analog-only television receivers. In other words, households that 
receive cable or satellite television service would not be eligible 
even if they have one or more analog-only television receivers not 
connected to such service.
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    \5\ H.R. REP. NO. 109-362, at 201 (2005) (Conf. Rep.).
    \6\ Id.
    \7\ See Section 3005(c)(1)(A) of the Act, 120 Stat. at 23 
(titled ``Two-per-household maximum'' provides that ``[t]he 
Assistant Secretary shall ensure that each requesting household 
receives, via the United States Postal Service, no more than two 
coupons'').
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    We invite comment on any other eligibility factors that NTIA should 
consider. For example, should NTIA consider economic need in the 
eligibility requirements for coupons? If so, how should ``economic 
need'' be determined? Should we propose a rule to make coupons 
available only to households with an income based on a poverty 
threshold? For example, should we distribute coupons only to those 
households with an annual income of $19,806 or below--the U.S. Census 
Bureau's poverty threshold for a family of four? \8\ Should we consider 
some other income level as a basis for eligibility for this program? We 
note that neither the Committee of Conference's Joint Explanatory 
Statement (the Manager's report) includes such a requirement regarding 
economic need or other factors that might be related to a household's 
eligibility to receive coupons.
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    \8\ See U.S. Census Bureau's Poverty Thresholds for 2005, http://www.census.gov/hhes/www/poverty/threshld/thresh05.html.
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    Depending on the demand for the coupons, it is possible that the 
number of requests for coupons may exceed the total dollar amount 
provided by the Act. If the number of requests exceeds $990,000,000 as 
specified in the Act, NTIA is authorized to request additional funds 
from the appropriate Congressional committees, as required by the 
Act.\9\ Recognizing that the additional funding, which cannot exceed 
$1,500,000,000, may still be insufficient to administer the program, 
NTIA proposes to fulfill valid coupon requests on a first-come, first-
served basis until funds devoted to this program have been spent. Are 
there other factors NTIA should consider in distributing coupons if the 
number of requests exceeds the number of coupons available? On the 
other hand, if the demand for coupons is low, should NTIA consider 
expanding its eligibility requirements?
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    \9\ See supra note 3.
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B. Coupon Value and Use Restrictions

    The Act states that the value of each coupon shall be $40.\10\ We 
recognize that the cost of a converter box may be greater than $40. 
NTIA proposes to issue $40 coupons that can be redeemed only

[[Page 42069]]

at a certified retailer when purchasing an eligible converter box. To 
keep track of the number of coupons issued, used and redeemed, as well 
as to minimize fraud and counterfeiting, NTIA intends to place 
identifying serial numbers on the coupons. NTIA invites comment on this 
proposal and other fraud prevention methods that are available or are 
currently being used. For example, instead of a paper coupon, should 
NTIA consider using an electronic coupon card?
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    \10\ Sec. 3005(c)(4), 120 Stat. at 24.
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    The Act also states that the ``[t]wo coupons may not be used in 
combination, toward the purchase of a single digital-to-analog 
converter box.'' \11\ As a result, NTIA proposes that each individual 
coupon be restricted for the purchase of one digital-to-analog 
converter box and that a coupon holder cannot use two coupons in 
combination toward the purchase of a single digital-to-analog converter 
box. To prevent fraud, NTIA proposes to prohibit a coupon holder from 
returning a converter box to a retailer for a cash refund or for credit 
towards the purchase of another item. NTIA proposes to permit the even 
exchange for another certified converter box in the event of defective 
or malfunctioning equipment. NTIA also proposes similar restrictions on 
participating retailers elsewhere in the rules. NTIA invites comment on 
these proposed rules.
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    \11\ See Sec. 3005(c)(1)(B) of the Act, 120 Stat. at 23 
(emphasis added).
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C. Application Process

    The Act states that a household may obtain coupons by making a 
request between January 1, 2008 and March 31, 2009.\12\ NTIA proposes 
to require consumers to request coupons by submitting an application in 
accordance with the eligibility criteria and procedures provided in 
this proposed rule. As part of the application process, NTIA proposes 
to require applicants to submit the following: (1) Name; (2) address; 
(3) the number of coupons that they require; (4) a certification that 
they only receive over-the-air television signals using an analog-only 
(NTSC) television receiver; and (5) a certification that no other 
member of the household has or will apply for a coupon. NTIA proposes 
to commence the application period on January 1, 2008 and conclude on 
March 31, 2009.
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    \12\ See id. at Sec. 3005(c)(1)(A).
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    The Act limits coupon distribution to two coupons per household and 
requires the Assistant Secretary of Communications and Information to 
ensure that the requesting households receive the coupons via the 
United States Postal Service.\13\ As stated above, NTIA proposes a rule 
through which an eligible U.S. television household that requests 
coupons must certify that it only receives over-the-air television 
signals using an analog-only (NTSC) television receiver, and that they 
receive only over-the-air transmissions in analog format, and that they 
do not receive service from a multichannel video program distributor 
such as a cable or satellite service. As part of the certification 
process, the applicant household must request the specific number of 
coupons that it requires, not to exceed two. An applicant household 
requesting more than one coupon must certify that it has more than one 
analog-only (NTSC) television receiver. If an applicant fails to 
specify the number of coupons that they require, that applicant will 
only receive one coupon. Once certified, the requested coupon(s) will 
be sent via the United States mail. Regardless of the manner or the 
type information being collected as part of the application process, 
NTIA intends to protect all such information consistent with applicable 
law including, but not limited to, the Privacy Act of 1974.\14\
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    \13\ See supra, note 5.
    \14\ 5 U.S.C. 552a.
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    NTIA intends to make application forms widely available. NTIA 
intends to allow potential applicants to request forms through the 
mail, via telephone, and over the Internet. NTIA places the highest 
priority on designing an application system that prevents waste, fraud, 
and abuse. As such, NTIA intends to utilize a computer based 
application system which prevents duplicate requests for coupons and 
other potential abuses of the program by households. NTIA seeks comment 
on ways to prevent waste, fraud, and abuse in the application process.
    The legislative history of the Act expresses an expectation that 
NTIA will use electronic media and networks to make aspects of the 
program more efficient.\15\ To that end, NTIA proposes to permit 
consumers to request, submit and track applications over the Internet. 
We invite comment on our proposal to permit consumers to submit 
electronic applications.
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    \15\ H.R. Rep. 109-362 at 202 (2005 (Conf. Rep.)).
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D. Coupon Expiration

    The Act states that all coupons will expire three months after 
issuance. NTIA proposes to print an expiration date on each coupon. 
NTIA also proposes that the expiration date will be three months after 
the coupon's issuance date, which would be the date upon which the 
coupon is placed in the U.S. mail. Consumers will not be able to redeem 
a coupon to purchase a converter box after the expiration date printed 
on a coupon and retailers will not be able to accept coupons for 
converter box purchases after their expiration date. NTIA believes that 
an expiration date will encourage consumers to obtain the necessary 
converter boxes in a timely manner. Moreover, a specified expiration 
date will reduce opportunities for waste, fraud, and abuse and provide 
greater efficiency and certainty in administering the program. We seek 
comment on this proposed rule and also on whether other options for 
addressing the expiration requirement are available. For example, 
should NTIA define the issuance date to be the date upon which a 
consumer receives a coupon? If so, how would NTIA calculate the 
expiration date of a coupon? Or should NTIA assume that the average 
delivery of a first class letter is two to three days and thus define 
the issuance date to be three days after the coupon is placed in the 
U.S. mail?

E. Digital-to-Analog Converter Box

    The Act defines the term ``digital-to-analog converter box'' 
(converter box) as ``a stand-alone device that does not contain 
features or functions except those necessary to enable a consumer to 
convert any channel broadcast in the digital television service into a 
format that the consumer can display on television receivers designed 
to receive and display signals only in the analog television service, 
but may also include a remote control device.'' It is our understanding 
that a converter box as defined by the Act is currently not 
commercially available, at least on a widespread basis. Ideally, a 
converter box should be able to receive digital broadcast signals in 
the same receiving configuration (e.g., same household antenna, same 
location) as used for the existing analog reception. We note, however, 
recent GAO congressional testimony indicating that antenna reception of 
digital signals may vary based on a household's geography and other 
factors.\16\
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    \16\ See GAO Challenges Report supra, note 7.
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    For purposes of the coupon program, NTIA proposes certain standards 
for a minimum-capabilities converter box that simply converts an 
Advanced Television Systems Committee (ATSC) terrestrial digital 
broadcasting signal to the analog National Television Standards 
Committee (NTSC) format. The digital converter box should be able to 
receive, render and display usable pictures and sound from high 
definition

[[Page 42070]]

as well as standard definition broadcast; however, the converter box 
would not be required to render pictures and sound at more than 
standard definition quality. Specifically, the converter box should be 
capable of receiving, decoding and presenting video and audio from 
digital television transmissions as specified in FCC Part 73 and ATSC 
Standards A/52A, A/53C, and A/65B.\17\ NTIA proposes to take into 
consideration the cost (i.e., inexpensive but meets the ATSC 
Recommended Practice: Receiver Performance Guidelines standard (A/74) 
of the converter box as well as the ease of installation and operation. 
Specifically, NTIA proposes the following characteristics in certifying 
a converter box:
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    \17\ See 47 CFR 73.682(d); ATSC Standards A/52A, Digital Audio 
Compression (AC-3), A/53C, Digital Television Standard, and A/65A, 
Program and System Information Protocol for Terrestrial Broadcast 
and Cable.
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    (a) Appropriately processes all ATSC radio frequency (RF) signals 
provided to the antenna-only input and then provides output signals in 
standard definition video for display on an NTSC television receiver/
monitor;
    (b) Delivers NTSC composite video and stereo audio to drive NTSC 
monitors;
    (c) Delivers Channel 3 or 4 switchable (NTSC) RF output for 
television receivers;
    (d) Complies with FCC requirements for Closed Captioned, Emergency 
Alert System (EAS) and the required parental controls;
    (e) Operable by and includes a remote control; and
    (f) Tunes to all television channels 2-69.
    NTIA proposes to accept certification for converter boxes that are 
capable of only receiving over-the-air broadcast signals for display 
over analog-only (NTSC) receivers/monitors to firmly control the nature 
of the input and output signals and connectors on the box. The only 
input of the converter box shall be for an external antenna. The 
outputs shall be channel 3 or 4 (NTSC modulated signals), composite 
video (NTSC baseband), and audio (stereo). The single input (Type F 
connector) ensures that only an antenna can be connected to eligible 
boxes thus ensuring use of such boxes as for over-the-air television 
reception only. The channel 3 or 4 analog output (Type F connector) 
ensures that older style NTSC analog television receivers can be 
connected to eligible boxes. The composite video and stereo audio (all 
three RCA connectors) ensures that other NTSC analog television 
monitors can also connect to the boxes. We seek comment on these 
characteristics that we propose to use to certify converter boxes and 
on other characteristics we should consider as well.
    NTIA proposes to require manufacturers to self-certify that the 
converter boxes meet the standards outlined in the rules. NTIA reserves 
the right to test the converter boxes that have been self-certified by 
the manufacturer to ensure that they meet those standards. We also 
invite comment on whether there are existing industry or government 
organizations engaged in activities that can help speed the development 
of testing/certification processes within the allowed time frame of 
this program?
    For purposes of this program, we interpret the Act's definition to 
mean that a digital-to-analog converter box is not a digital cable 
television box. Therefore, we do not propose to accept self-
certifications for a digital cable television box. We also do not 
intend to accept certifications for converter boxes that have features 
beyond those necessary to convert an ATSC digital signal to an analog 
NTSC format. We invite comment on the appropriate minimum technical 
capabilities for converter boxes. We also seek comment on the extent we 
should consider certain standards, such as energy standards, in 
determining the type of converter box that would be eligible for this 
program.\18\ How would these standards affect this program?
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    \18\ See e.g., Cal. Code Regs, tit. 20, section 1605 (2004).
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    Finally, NTIA is seeking comments on how the converter boxes 
eligible for participation in the coupon program should be identified 
for the consumer. Should NTIA print a list of approved converter boxes 
on the coupons or on information sent with the coupons? Should NTIA 
maintain an Internet Web site listing approved converter boxes? Should 
it be left to the retailer to inform consumers which converter boxes 
are eligible for the coupon through the retailers advertising or at 
placards at point of sale?

F. Retailer Certification

    Participation by retailers in this program is voluntary. Retailers 
that choose to participate will not be compensated by NTIA. We propose 
to permit consumers to redeem coupons at retailers that have 
established production and distribution channels and who have 
demonstrated that they can redeem coupons expeditiously and 
efficiently. We note that retailers are also typically familiar with 
coupon programs and have systems in place to process coupons. We are 
also interested in retailers that can handle converter box purchases 
with the coupons via mail, phone or the Internet-based sales.
    We propose to institute a process for retailers through which they 
must certify, under penalty of law, that they: (1) Provide information 
to customers about the necessity for and the installation of a 
converter box; (2) have in place systems that can be easily audited as 
well as systems that have the ability to prevent fraud and abuse in the 
coupon program; (3) are willing to be audited at any time during the 
course of the coupon program; (4) have the ability to electronically 
provide NTIA with sales information related to coupons used in the 
purchase of converter boxes, specifically tracking each serialized 
coupon by number with a corresponding certified converter box purchase; 
and (5) will only submit coupons for redemption as a result of 
purchases made for converter boxes certified by NTIA.
    NTIA also proposes to require retailers to adhere to and enforce 
coupon restrictions contained in the Act such as prohibiting coupon 
holders from using two coupons in combination towards the purchase of a 
single digital-to-analog converter box. We will require retailers to 
prohibit consumers from using coupons to purchase any device other than 
a converter box certified pursuant to this rulemaking. Moreover, we 
expect retailers to have in place a system that prevents consumers from 
returning a converter box to the retailer for a cash refund or for 
credit towards the purchase of another item. In other words, a coupon 
holder is limited to an even exchange of one certified converter box 
for another. NTIA proposes to require retailers to submit coupons or 
coupon information to NTIA for redemption within 30 days after the 
coupon has been used to purchase a converter box. NTIA also proposes to 
require retailers to retain hard copies of sales information related to 
converter boxes purchased with coupons for one year. We seek comment on 
ways to prevent waste, fraud and abuse in the process by which 
retailers accept and process coupons.
    As part of the certification process, NTIA intends to inform 
retailers of the coupon program's details and their rights and 
obligations, including their obligations to honor all valid coupons 
that are tendered in the authorized manner. NTIA proposes to reimburse 
retailers within 60 days after receiving sales information related to 
converter boxes purchased with coupons. NTIA also proposes to review 
and resolve any

[[Page 42071]]

allegation by the retailer that it was improperly denied reimbursement 
for a valid coupon properly tendered and accepted pursuant to the 
rules. We request comment on our proposed rule with respect to the 
self-certification process and other rights and responsibilities 
identified for retailers. NTIA places the highest priority on creating 
a coupon redemption process that prevents waste, fraud and abuse, while 
minimizing the burden on participating retailers and consumers. 
Therefore, we also seek comment on the various ways to prevent waste, 
fraud and abuse in the coupon redemption process.

G. Consumer Education

    In addition to the proposed rules above, we also solicit comment on 
other issues related to the coupon program that are not a part of the 
rulemaking process. For example, we solicit views on the most effective 
means to provide consumer education about this program. The Act 
provides that NTIA may spend ``not more than $5,000,000 for consumer 
education concerning the digital transition and the availability of the 
digital-to-analog converter box program.'' Considering the costs of 
media production and paid advertising time, the $5,000,000 limit 
necessitates that NTIA carefully leverage the program's consumer 
education spending by collaborating with and complementing the consumer 
education efforts of broadcasters, equipment manufacturers, retailers, 
consumer groups and others with a stake in a successful and timely 
transition to digital television broadcasting. According to the FCC Web 
site, a wide range of broadcasters, equipment manufacturers, retailers, 
consumer groups and others have begun to produce and provide 
information concerning the digital transition.\19\
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    \19\ The Federal Communications Commission maintains a consumer 
education website on the digital television transition at http://www.dtv.gov.
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    In order to maximize consumer education efforts, NTIA may seek 
proposals to produce commonly used on-air announcements, print and 
online promotional materials as well as other media or services that 
can be used to convey clear, consistent, frequent and widely 
disseminated information concerning the existence of the digital-to-
analog converter box program and the actions that households must take 
to obtain coupons and converters. Examples include advertising 
campaigns, public service announcements, print articles, web sites, and 
posters for public display. Any public information campaign undertaken 
by NTIA will only be successful if other stakeholders in the digital-
to-analog converter box program contribute significant effort to the 
production and distribution of this information.
    We seek comment on ways to provide consumer information to those 
households most likely to rely solely on over-the-air broadcasts in 
analog format. We note that there are differences in the estimated 
number of households that rely exclusively on over-the-air broadcasts. 
For example, as noted above, the legislative history indicates that 
14.86 percent of U.S. households rely exclusively on over-the-air 
transmissions, whereas the Government Accountability Office (GAO) 
provided an estimate of 19 percent or 21 million American 
households.\20\ We note also that in recent congressional testimony GAO 
stated that the identification of households that rely exclusively on 
over-the-air television is difficult because no list of such households 
exists.\21\ GAO also noted that information on the inverse--those 
households that subscribe to cable or satellite service--is dispersed 
across hundreds of providers, and these providers may face limitations 
on the release of their lists to others. Thus, any information as to 
ways to target consumer outreach to those households eligible for 
coupons under this program would be helpful. The Managers' Report 
provides that NTIA may use the efficiencies of electronic media and 
networks for outreach efforts. We solicit comment on the best ways to 
utilize the Internet and other forms of electronic media to disseminate 
consumer information on the various aspects of the program. Again, we 
seek information regarding ways primarily to target those specific 
households that only receive over-the-air television broadcast signals.
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    \20\ See ``Digital Broadcast Television Transition: Estimated 
Cost of Supporting Set-Top Boxes to Help Advance the DTV 
Transition,'' GAO-05-258T (February 17, 2005).
    \21\ See GAO Challenges Report, supra note 7.
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III. Submission of Comments

    NTIA requests written comments from interested parties on the 
proposed rule as stated above as well any other aspects of the Act 
related to the digital-to-analog converter box program. NTIA is 
especially interested in receiving written comments from persons with 
particular knowledge of the legal, economic and technical elements 
related to such a program. Any information submitted to NTIA, however, 
should not contain confidential, proprietary or business sensitive 
data.

Executive Order 12866

    This proposed rule has been determined to be economically 
significant for purposes of Executive Order 12866; and therefore, has 
been reviewed by the Office of Management and Budget (OMB). In 
accordance with Executive Order 12866, an Economic Analysis was 
completed, outlining the costs and benefits of implementing this 
program. The complete analysis is available from NTIA upon request.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. NTIA has determined that the rule meets the applicable 
standards provided in section 3 of the Executive Order, to minimize 
litigation, eliminate ambiguity, and reduce burden.

Congressional Review Act

    This rule has been determined to be major under the Congressional 
Review Act, 5 U.S.C. 801 et seq.

Regulatory Flexibility Act

    As required by the Regulatory Flexibility Act, 5 U.S.C. 603, NTIA 
has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the 
possible significant economic impact on small entities of the policies 
and rules addressed in this Notice. The IRFA is set forth in Appendix 
A. Written public comments are requested on the IRFA. These comments 
must be filed in accordance with the same filing deadlines a comments 
filed in response to this Notice and must have a separate and distinct 
heading designating them as responses to the IRFA.

Information Collection and Recordkeeping Requirement

    This document contains proposed information collection 
requirements. In accordance with the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), NTIA invites comments on this information 
collection for which NTIA intends to request approval from the Office 
of Management and Budget (OMB). To successfully administer this 
program, NTIA requests approval on three collection requirements and 
recordkeeping and reporting requirements for: (1) The application that 
households must submit to receive coupons; (2) the certification form 
for retailers that will sell the converter boxes and submit coupons for 
redemption; and (3) the certification form and recordkeeping and 
reporting requirements for manufacturers

[[Page 42072]]

regarding converter boxes eligible for the coupon program.
    Comments on the information collection and recordkeeping 
requirements in this proposed rule must be received by September 25, 
2006.
    Comments are invited on (a) Whether the collection of information 
is necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility; (b) the 
accuracy of the agency's estimate of burden including the validity of 
the methodology and assumptions used; (c) ways to enhance the quality, 
utility and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on those who are 
to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology.
    Comments on the information collection and recordkeeping 
requirements in this proposed rule may be sent to Milton Brown, Office 
of the Chief Counsel, National Telecommunications and Information 
Administration, 1401 Constitution Avenue, Room 4713, Washington, DC 
20230.
    (1) Title: Application for the Digital-to-Analog Converter Box 
Coupon.
    Type of Request: New Collection.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average .25 hours (15 minutes) per 
respondent.
    Respondents: U.S. television households that receive only over-the-
air television in analog format.
    Estimated Number of Respondents: 21 million U.S. television 
households.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: .5 hours.
    (2) Title: Certification for Retailer to Accept and Redeem Coupons 
for the purchase of a Digital-to-Analog Converter Box Coupon.
    Type of Request: New Collection.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1.0 hour per respondent.
    Respondents: Retailers that accept coupons for digital-to-analog 
converter boxes and submit them to NTIA for redemption.
    Estimated Number of Respondents: 100.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 1 hour.
    (3) Title: Certification of Digital to Analog Converter Box.
    Type of Request: New Collection.
    Estimate of Burden: Public reporting burden for this collection is 
estimated at 1 hour per respondent.
    Respondents: Companies that manufacture digital-to-analog converter 
boxes who request NTIA certification.
    Estimated Number of Respondents: 20.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 1 hour.
    All responses to this information collection and recordkeeping 
notice will be summarized and included in the request for OMB approval. 
All comments will also become a matter of public record.

Executive Order 12372

    No intergovernmental consultation with State and local officials is 
required because this rule is not subject to the provisions of 
Executive Order 12372, Intergovernmental Consultation.

Unfunded Mandates

    This rule contains no federal mandates (under the regulatory 
provision of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

National Environmental Policy Act

    It has been determined that this rule does not constitute a major 
federal action significantly affecting the quality of the human 
environment, and in accordance with the National Environmental Policy 
Act of 1969 [42 U.S.C. 4321 et seq.] (NEPA), an Environmental Impact 
Statement is not required.

Government Paperwork Elimination Act

    NTIA is committed to compliance with the Government Paperwork 
Elimination Act, which requires Government agencies to provide the 
public the option of submitting information or transacting business 
electronically to the maximum extent possible.

Executive Order 12630

    This rule does not contain policies that have takings implications.

Executive Order 13132

    This rule does not contain policies having federalism implications 
requiring preparation of a Federalism Summary Impact Statement.

    Authority: Title III of the Deficit Reduction Act of 2005, Pub. 
L. 109-171, 120 Stat 4, 21 (Feb. 8, 2006).

    Dated: July 18, 2006.
John M. R. Kneuer,
Acting Assistant Secretary for Communications and Information.

Appendix A--Initial Regulatory Flexibility Analysis

    As required by the Regulatory Flexibility Act (RFA) of 1989, as 
amended, NTIA has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) addressing the economic impact on small entities 
that might result from this Notice of Proposed Rulemaking 
(``Notice'' or ``proposed rule'').\1\ NTIA requests written public 
comments on this IRFA. Comments must be identified as responses to 
the IRFA and must be filed by the deadlines for comments on the 
Notice provided above. We will consider all timely comments in 
drafting our final Regulatory Flexibility Analysis and in making our 
decision on a final rule. NTIA will send a copy of the Notice, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration.
---------------------------------------------------------------------------

    \1\ See 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    This analysis addresses six issues: (1) A description of the 
reasons why action by NTIA is being considered; (2) the proposed 
rule's objectives and legal basis; (3) a description of and, where 
feasible, an estimate of the number and types of small entities 
affected by the proposed rule; (4) a description of the projected 
reporting, recordkeeping and other compliance requirements of the 
proposed rule, including an estimate of the classes of small 
entities which will be subject to the requirement; and (5) the 
relevant rules that could duplicate, overlap, or conflict with the 
proposed rule. The following sections provide details on each of 
these issues.

A. Need for, Objectives of, the Proposed Rule

    NTIA is promulgating this proposed rule because of a statutory 
mandate to create a subsidy program that will affect the public 
under section 3005 of Public Law 109-171.\2\ This legislation, known 
as The Digital Television Transition and Public Safety Act of 2005 
(the Act), requires the Federal Communications Commission (FCC) to 
require full-power television stations to cease analog broadcasting 
by February 18, 2009. After that date, households using analog-only 
televisions not connected to cable or satellite service will no 
longer be able to receive television broadcast unless the television 
is connected to a converter box that converts the digital signal to 
analog format. As a result, the Act authorizes NTIA to create a 
program whereby certain households can apply for $40 coupons to be 
used towards the purchase of digital-to-analog converter boxes.
---------------------------------------------------------------------------

    \2\ See Title III of the Deficit Reduction Act of 2005, Pub. L. 
109-171, 120 Stat. 4, 21 (Feb. 8, 2006).
---------------------------------------------------------------------------

    The proposed rule sets forth a framework to implement the coupon 
program as authorized by the Act. Moreover, the proposed rule 
provides public notice as well as an opportunity for the public to 
comment.

[[Page 42073]]

The proposed rule provides clear guidelines to consumers, 
manufacturers and retailers regarding eligibility, responsibilities 
and certifications.

B. Legal Basis

    The legal basis for any action taken pursuant to this proposed 
rule is contained in the Act. Specifically, section 3005 of the Act 
directs NTIA to implement and administer a program through which 
eligible U.S. households may obtain a maximum of two coupons, $40 
each, to be applied towards the purchase of a digital-to-analog 
converter box. The Act defines the term ``converter box'' to mean a 
stand-alone device used solely for digital-to-analog conversion.\3\ 
The Act does not define ``eligible household.'' To implement the 
coupon program, the Act authorizes NTIA to use up to $990 million 
from the Fund for the program, including $100 million for program 
administration. NTIA is also authorized to expend up to $1.5 billion 
for the program, including $160 million for administration, upon a 
60-day notice and certification to the Committee on Energy and 
Commerce of the House of Representatives and the Committee on 
Commerce, Science, and Transportation of the Senate that the $990 
million is insufficient to fulfill coupon requests for eligible U.S. 
households.\4\ This section also authorizes NTIA, beginning on 
October 1, 2006, to borrow not more than $1.5 billion from the 
Treasury to implement the program. NTIA, however, must reimburse the 
Treasury for this amount, without interest, as recovered analog 
television spectrum auction proceeds are deposited into a new 
Treasury fund to be known as the Digital Television Transition and 
Public Safety Fund.
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    \3\ Section 3005(d) provides that the term ``digital-to-analog 
converter box'' means ``a stand-alone device that does not contain 
features or functions except those necessary to enable a consumer to 
convert any channel broadcast in the digital television service into 
a format that the consumer can display on television receivers 
designed to receive and display signals only in the analog 
television service, but may also include a remote control device.'' 
120 Stat. at 24.
    \4\ See supra note 2 at Section 3005(c)(3).
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C. Description and Estimate of the Number of Small Entities to 
Which the Proposed Rules May Apply

    The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules.\5\ The RFA generally defines the 
term ``small entity'' to include ``small business,'' ``small 
organization,'' or ``small governmental jurisdiction.'' \6\ The 
Small Business Administration defines small entities in the ``radio, 
television, and other electronic stores'' sector as those 
organizations with less than $8 million in annual revenue.\7\ With 
respect to equipment manufacturers, the SBA defines those small 
entities as those with less than 750 employees.
---------------------------------------------------------------------------

    \5\ 5 U.S.C. 603(b)(3), 604(a)(3).
    \6\ 5 U.S.C. 601(6).
    \7\ See U.S. Small Business Administration Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes, http://www.sba.gov/size.
---------------------------------------------------------------------------

    NTIA does not have precise information on the number of 
qualifying small businesses that are in the manufacturing or 
electronic retailing sectors that would be affected by the proposed 
rule. According to data from the U.S. Census Bureau, there were 1041 
U.S. companies in 2002 that manufactured radio and television 
communications equipment, and approximately 1010 of these firms were 
classified as small entities having fewer than 750 employees.\8\ 
Specific figures for the number of firms that manufacture television 
equipment are unavailable; however, NTIA believes that some of these 
companies are capable of manufacturing a digital-to-analog converter 
box and qualify as small entities. To the extent that there exists 
small entities capable of manufacturing a converter box pursuant to 
the standards provided in the proposed rule, the extent to which 
they participate in the coupon program will be a business decision 
and not based on any mandatory action resulting from the proposed 
rule. Thus we are unable to predict with any certainty as to the 
number of small firms that will view the coupon program as a 
business opportunity and thus be affected by the proposed rule. We 
anticipate that comments to the proposed rule and to this IRFA will 
be informative on this subject.
---------------------------------------------------------------------------

    \8\ See U.S. Census Bureau, 2002 Economic Census, Industry 
Statistics by Employment Size, Radio and Television Broadcasting and 
Wireless Communications Equipment Manufacturing (NAICS Code 334220), 
Table 4, available at http://www.census.gov/econ/census02.
---------------------------------------------------------------------------

    Likewise, it is difficult to ascertain the number of consumer 
electronics retailers that qualify as small entities. Certain data 
from trade associations, however, provide a glimpse of the type of 
small businesses that may participate in the coupon program. For 
example, the Professional Audio-Video Retailers Association (PARA) 
division of the Consumer Electronics Association (CEA) has more than 
250 professional audio, video, home theater, and custom electronics 
specialty dealers.\9\ CEA has also formed a partnership with the 
North America Retail Dealers Association (NARDA), a group of 
independent retailers that include consumer electronics retailers 
that represent approximately 3,500 storefronts and accounts for over 
$11 billion in annual sales.\10\ However, not all NARDA members may 
be interested in participating in the digital-to-analog converter 
box coupon program. In addition to consumer electronics, NARDA's 
members also sell and service kitchen and laundry appliances, 
consumer mobile electronics, computers and other home and small 
office products, furniture, sewing machines, vacuum cleaners, room 
air conditioners, and other consumer home products. NARDA's members, 
however, are not limited to retailers, but also include 
manufacturers, suppliers and vendors. Moreover, both PARA and NARDA 
members may be specialty electronic dealers not interested in 
selling converter boxes.
---------------------------------------------------------------------------

    \9\ See http://www.ce.org/Membership/Divisions/98.asp.
    \10\ See http://www.narda.com.
---------------------------------------------------------------------------

D. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements

    The proposed rules place certain compliance requirements on 
manufacturers and retailers that choose to participate in the 
program. For example, the proposed rule requires retailers to 
certify under law that they: (1) Will educate their customers on the 
necessity for and the installation of a converter box; (2) have 
systems in place that can be easily audited as well as systems that 
have the ability to prevent fraud and abuse in the coupon program; 
(3) are willing to be audited at any time during the course of the 
coupon program; (4) have the ability to electronically provide NTIA 
with sales information related to coupons used in the purchase of 
converter boxes, specifically tracking each serialized coupon by 
number with a corresponding certified converter box purchase; and 
(5) will only submit coupons for redemption as a result of purchases 
made for converter boxes certified by NTIA. The Notice also requires 
retailers to submit coupons for redemption within 30 days after they 
have been used for a purchase, and to retain hard copies of sales 
information for one year after the purchase.
    With respect to manufacturers, the proposed rule provides 
standards that will be required for converter boxes for the coupon 
program. These standards are necessary to comply with the Act and to 
ensure that converter boxes function properly. Manufacturers will be 
required to submit a self certification that affirms that these 
standards have been met.

E. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    The proposed rule has minimal economic impact on small entities. 
Participation in the coupon program on all levels--consumers, 
manufacturers, and retailers--is voluntary. Thus any significant 
economic impact would not be caused by the proposed rule that 
creates and implements the coupon program, as small entities are not 
required by the rules to participate in the program. However, if a 
small entity does participate in the program, there is no indication 
that they will incur significant economic impacts. Moreover, there 
does not appear to be any economic impact on small businesses by a 
decision not to participate in the program.

Associated Costs

    Although there may be costs associated with accepting the 
coupons and distributing the converter boxes, the coupon program 
does not restrict the retailer in pricing the converter box. 
Manufacturers and retailers may consider these associated costs and 
establish the wholesale and retail price of the converter boxes to 
recoup any associated costs. In fact, the coupon program anticipates 
that there will be a co-pay element to the purchase price. Thus, to 
the extent that a small retailer or manufacturer incurs costs as a 
result of this program, those costs can be recouped though the 
retail or wholesale price which the retailer and manufacturer are at 
liberty to choose.
    Section D of this IRFA provides the compliance requirements of 
the proposed

[[Page 42074]]

rule that retailers must assume if they decide to participate in the 
coupon program. Besides the time that it takes to submit a 
certification form to NTIA, there will be actual costs associated 
with meeting these compliance requirements. These costs, however, 
are difficult to quantify because of many varying factors. However, 
we anticipate that the costs would be minimal because retailers and 
manufacturers may already have the ability to meet the requirements 
associated with participation in this program. For example, 
retailers would have to ensure that employees are capable of 
educating customers about the necessity for and installation of 
converter boxes. The costs for this compliance would be calculated 
by the number of hours it would take to train employees. The 
estimate would depend on a number of factors such as the existing 
sales force's expertise, number of employees, salary levels, type of 
converter box that is certified, and the consumer knowledge.
    The proposed rule also requires retailers to have systems in 
place that can be easily audited as well as systems that have the 
ability to prevent fraud and abuse in the coupon program. We assume 
that most businesses would have systems in place that can be easily 
audited, and therefore, we do not anticipate that small businesses 
will have to assume a cost to purchase a new system for the coupon 
program. Retailers must also have systems in place that have the 
ability to prevent fraud and abuse in the coupon program. We assume 
that most retailers are familiar with and accept coupons for 
merchandise, and that they have in place systems to prevent fraud. 
The nature of this coupon program, however, may require 
participating retailers to assume additional costs associated with 
preventing fraud. These costs cannot be estimated at this point in 
the rulemaking process. There may be costs associated in complying 
with an audit. These costs would most likely be calculated in terms 
of employee hourly rates. The associated costs depends on the nature 
and extent of an audit.
    There are also costs associated with handling coupons, that is, 
accepting the coupons, submitting the coupons for redemption, and 
retaining hard copies of the coupons pursuant to the regulations. 
Again, these associated costs depend on a number of factors such as 
the particular systems that retailers currently have in place, as 
well as the extent to which these costs can be absorbed within 
existing procedures that the retailer has in place.
    Likewise there are costs associated with small manufacturers 
complying with the proposed rule. Manufacturers must ensure that the 
converter box meet the standards outlined in the final rule. 
Manufacturers would also have to assume up front costs of 
manufacturing and distributing the boxes to certified retail 
outlets. These costs are dependent upon a number of factors such as 
the cost to the manufacturer to build the converter box pursuant to 
regulations, the manufacturer's established distribution lines, the 
number of retailers participating, and any relationship that may or 
may not exist between the manufacturer and the retailer.

Exemptions and Waivers

    The proposed rule does not provide a small business exemption 
for any compliance requirements. To the extent possible, the 
proposed rule limits reporting and recordkeeping requirements to 
only those necessary to provide the coupons in accordance with the 
Act. Any exemption or waiver of the requirements imposed on 
manufacturers or retailers would potentially subject the program to 
waste, fraud and abuse.
    It is not essential that small businesses obtain a waiver of the 
certification requirement outlined in the section above. It is 
important for small retail businesses participating in the program 
to be knowledgeable on the particular converter boxes certified by 
the program, and for their sales staff to be able to provide 
direction and guidance for consumers. Moreover, these retailers 
would have to utilize systems that accommodate the government issued 
coupons. In the long run, the certification program may provide some 
protection from consumer liability for small businesses that provide 
converter boxes consistent with the government-established 
certification requirement. As such, a small business could assure 
customers that the converter box meets government standards, which 
may offset returns and other issues that could cause additional 
costs for the business.
    The requirement for retailers to submit coupons for redemption 
within 30 days after they have been used for purchase, and the 
requirement to retain hard copies of sales information for one year 
after the purchase also should not be waived for small businesses. 
These redemption and record-keeping requirements are necessary to 
keep track of the number of coupons used and to ensure that the 
program can be properly audited at any time. The ability of the 
agency to monitor the program and to audit the program outweighs any 
burden on small businesses to comply with these requirements. Again, 
any costs imposed on small businesses to comply with these 
requirements can be recouped through the retail price of the 
converter box.
    Likewise, compliance requirements cannot be waived for small 
businesses that manufacturer converter boxes. The standards outlined 
in the proposed rule are necessary to comply with the Act and to 
ensure that the converter boxes certified by the program function 
properly.
    Regarding alternatives considered, the proposed rule requests 
comment on whether a paper coupon or an electronic coupon card 
should be used. If an electronic coupon card is used, small 
businesses may not be able to participate in the coupon program if 
they do not have a system in place that accepts coupons 
electronically. On the other hand, paper coupons may present an 
additional burden on small businesses in processing the sale and 
submitting the hard copy for redemption. Either of these 
alternatives will only affect small businesses to the extent that 
they choose to participate in the coupon program.

Alternatives To Minimize Burdens

    NTIA has taken steps to minimize burdens on small retailers and 
manufacturers in its proposed rule. For example, NTIA has proposed a 
self-certification process for both retailers and manufacturers for 
the compliance requirements discussed above. Alternatively NITA 
could require a third-party certification process, or institute a 
procedure whereby NTIA certifies the compliance requirements. Either 
option includes additional steps in the certification process and 
therefore would increase time and cost.
    We have also sought to minimize burdens on small retailers by 
proposing clear rules with respect to the redemption process. 
Retailers have certainty that if they submit their coupons within 
the time established in the rules, they will be reimbursed in a 
timely manner. This proposal removes any uncertainty on the part of 
the retailer as to when they can receive full payment.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    NTIA is not aware of any Federal rules that may duplicate, 
overlap or conflict with the proposed rules.
    The preceding analysis indicates that the expected burden on 
small entities to implement the proposed rule would be minimal.

[FR Doc. E6-11754 Filed 7-24-06; 8:45 am]
BILLING CODE 3510-60-P